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LOU DOBBS MONEYLINE

Violence Escalates in Middle East

Aired April 2, 2002 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, CNN ANCHOR: Tonight, Palestinian gunmen take refuge in the Church of the Nativity in Bethlehem. The fighting with Israeli soldiers is intensifying. Ariel Sharon wants to exile Yasser Arafat. Arab and European nations are calling upon Israel to withdraw. Senator George Mitchell is my guest.

You're looking now at pictures of your tax dollars at work today in the Middle East. People in several Arab nations today protested U.S. support of Israel. Tonight, we'll have a special report on American financial aid to the Arab world, and what we're receiving in return for all that money.

Guess who's been throwing lots of money around in Washington, D.C. -- the accounting industry. It spent millions of dollars on lobbying and political campaigns. We'll tell you where all that money went, and why the accountants were spending so much of it.

And tonight, a former chairman of the Securities and Exchange Commission joins us to tell us why he's angry with the Justice Department's handling of the Andersen case. Professor David Ruder is my guest tonight. And he'll tell us what can be done to save Andersen.

Good evening. Tonight, dozens of armed Palestinians are taking cover inside one of the holy sites in the Middle East, Bethlehem's Church of the Nativity. Those gunmen forced their way inside the church following an intense battle with Israeli tanks and helicopter gunships.

Elsewhere, Israeli troops seized control of another West Bank town. And Yasser Arafat remains pinned down inside his Ramallah office, without either electricity or running water.

For more on the escalating violence, I'm joined by Christiane Amanpour in Jerusalem -- Christiane.

CHRISTIANE AMANPOUR, CNN CORRESPONDENT: Lou, well, first to the situation in Bethlehem, which appears to be ongoing. It's not exactly clear what is going on inside that church. There are people in there who have gone in seeking sanctuary.

We're being told by Palestinians that, yes, some of them do have arms. And they were members, they say, of some of the security forces around Bethlehem. We have not been able to get any comment from the Israelis because they say they are not commenting right now on an ongoing operation.

We're told by people inside that church that nuns inside are trying to care for some of the people who are wounded. But we're told that there is no actual fighting in that church at the moment, although it is surrounded. This, after a day in which the Palestinian town of Bethlehem was taken over by the Israelis. They went in to try to root out more of these people on their wanted list.

We're told by Palestinians that some four Palestinians were shot and killed, apparently members of the Al-Aqsa Martyrs Brigade, militants allied with Arafat's Fatah organization who are wanted by Israel.

At the same time in Ramallah, another day of military activity there. Especially the incursion and the invasion into the preventive security headquarters. There were some 400 people holed up there overnight. Most of those, in a U.S. and European-brokered deal, have come out.

Arafat remains holed up inside his compound. We haven't actually heard from him directly today. But Ariel Sharon, prime minister of Israel, made that comment that if anybody wants to go to see him, in terms of international mediators, the only way they could do that was if they took him out and never brought him back.

(BEGIN VIDEO CLIP)

ARIEL SHARON, ISRAELI PRIME MINISTER: I suggested, and I told them, that if they would like, that we will bring him somewhere, or they will come with helicopter and will take him from here. But first of all, I will say that three things. One, I have first to bring it to the cabinet to be approved. Second, he cannot take anyone with him because they are wanted and murderers surrounding him there. And the third thing, is going to be one-way ticket. Will not be able to return.

(END VIDEO CLIP)

AMANPOUR: Well, of course, that notion was floated to the Israeli cabinet on Friday, ahead of the military invasion. But the majority of the cabinet decided that exile was not a good idea at the moment, that isolation should be the strategy. Of course, Palestinian officials saying that there's no way Yasser Arafat would leave voluntarily.

In an interview today with the Palestinian negotiator Saeb Erakat over in Jericho, where he is kept and prevented from coming out, we asked him, what next? He said, one way out would be to try to implement the latest U.N. Resolution, calling for a cease-fire and a withdrawal, but also made an impassioned plea for American help.

(BEGIN VIDEO CLIP)

SAEB ERAKAT, PALESTINIAN CABINET MEMBER: The shortest way now is to have a sense of direction. And I would address myself to President Bush and to the members of the Security Council, who passed resolution 1402 just two days ago.

This resolution has all the ingredients that are required to de- escalate and to de-conflict. One, the element of a cease-fire. The Israeli withdrawal, the implementation of Tenet and Mitchell, and the political resumption of negotiations. And this resolution mentions Zinni's name.

And I would say to President Bush, there are three American names that are mentioned in this Security Council resolutions: General Zinni, George Tenet, and George Mitchell. We need to see some action by President Bush. We need to see some sense of direction.

(END VIDEO CLIP)

AMANPOUR: Now, there are more Israeli military incursions as this offensive and this operation widens. The latest reports are that they are in and around the city of Jenin, the northern city in the West Bank. And tanks are poised around a refugee camp there. That camp is particularly on Israel's wanted list, if you like, because they say that a lot of the suicide bombers come from there.

Perhaps we're expecting, in the early hours of this morning, the Israeli tanks and troops to go in there and start doing the same kinds of operations that they've been doing in other towns on the West Bank -- Lou.

DOBBS: Christiane, thank you very much. Christiane Amanpour, reporting from Jerusalem.

Arabs across the Middle East have been protesting U.S. support of Israel. And yet America continues to support those countries, financially. Not just through purchases of oil, but with billions of dollars in direct aid. Kitty Pilgrim reports now on what that tax money is buying.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): In Egypt, the streets are erupting with violent anti-American and anti-Israeli demonstrations. American flags are burned. Yet the United States is pouring $2 billion into Egypt in economic and military aid. It is the second-largest recipient in the region, next to Israel, which gets some $3 billion a year.

In Jordan, a similar scene. The United States sends $150 million in economic aid, $75 million in military assistance. Even the Palestinian Authority gets some $75 million from the United States. What is all the money for? The economies are in ruins, and peace is all but lost.

MICHAEL O'HANLON, THE BROOKINGS INSTITUTION: Part of why we give money to these countries is to help governments whose positions aren't that secure with their own people, because they either need to improve their economies or because politically they could be in something of a fragile position. So the fact that there are demonstrations doesn't mean that the governments are ungrateful. It means the governments face internal forces.

PILGRIM: U.S. policy strategists say it's money well spent.

JAMES PHILLIPS, THE HERITAGE FOUNDATION: The street demonstrations often are emotional reaction of a population that can't protest against its own government, so many times, it uses the U.S. or Israel as a scapegoat. And the governments involved permit that because it's not aimed at them.

PILGRIM: And those strategists say strategic allies, no matter how unstable, need to be supported. Economies must flourish for peace.

JUDITH BURNETT, PA CONSULTING: Their leadership has been as supportive as they can. They live in a rough neighborhood. And I believe that the kinds of demonstrations that we'll see could get worse if America doesn't go in and begin to help out, again, to become an honest broker.

(END VIDEOTAPE)

PILGRIM: Which all comes back to the same conundrum. U.S. aid is needed, but it's U.S. direct involvement in the Israeli-Palestinian conflict that's being called for at the government level. And ironically, that kind of involvement is being protested in the streets -- Lou.

DOBBS: Kitty, thank you very much.

Well, the surge of violence in the Middle East has many wondering whether the peace process that began with the Oslo Agreement of 1993 is dead. Before the siege of PLO leader Yasser Arafat's headquarters, hopes of reviving those talks lay in two U.S.-brokered plans. One, masterminded by CIA director George Tenet, would have laid the groundwork for a cease-fire. The other, by former Senate majority leader George Mitchell would have paved the way for a political settlement.

Senator Mitchell joins me now. Senator, good to have you here.

SEN. GEORGE MITCHELL (D-AZ), FMR. MAJORITY LEADER: Thank you, Lou. Good to be here.

DOBBS: This escalating violence -- is there any end in sight here?

MITCHELL: There's no end in sight right now. But I believe it inevitable that the violence will come to an end if the parties will return to the negotiating table, primarily because life is unbearable for the members of both societies. This has devastating effects on the economies and on the daily lives of Israelis and Palestinians alike. DOBBS: Their economies, as Kitty Pilgrim just reported, are simply devastated. Israel's economy in deep recession. The Palestinians, with one of the lowest GDP per capitas in the world. Will the economic issues be faced by the western powers who want peace in this area, even if the participants don't?

MITCHELL: I think that will be the result of all of this. The aid that was mentioned on the previous segment came out of the Camp David settlement. Part of Camp David was that the United States would provide $3 billion a year to Israel and $2 billion a year to Egypt.

The aid to Jordan arises from the Jordan-Israel agreement. So we proposed these agreements, we backed them up, and one way we do so is by providing assistance. In effect, inducement to continue to live in peace.

DOBBS: An inducement that is certainly not being adequately embraced by either the Palestinians or the Israelis, at this point. What is going to be required here to, first, achieve a cease-fire, and hopefully move to the level of the Mitchell Plan?

MITCHELL: When I went over there a year ago, Lou, I thought the toughest issues would be the last ones: Jerusalem, the return of refugees, the land. I now believe that the toughest issue is the first one: ending the violence and getting into the talks.

I think if they ever get to serious negotiations they will resolve those major issues, one way or another, as a result of tough bargaining and negotiation with U.S. participation. But getting there is really proving to be very difficult.

DOBBS: The president is being criticized in many corners for not being sufficiently personally engaged in resolving this conflict. Do you think that is fair criticism?

MITCHELL: I think there has been a growing level of participation by the president and by the secretary of state. Not everything the president does is visible to the public. He's on the phone quite a bit. The secretary of state's been very active.

And I think they recognize very well that this can't happen without active, aggressive, American leadership at the very highest level. And I think you'll see that increase continue, in fact, ramp up in the next few weeks.

DOBBS: Part of the conundrum here is, if you will, the process itself. The United States is perceived accurately by the Palestinians to be in support of Israel. The United States is attempting to be an honest broker.

If there is that kind of (UNINTELLIGIBLE), is there the possibility that the United States should withdraw as the honest broker and simply encourage the United Nations to take the leadership? Because what the United States -- not only this president, but every president before him -- has failed to do, in bringing peace to the region? MITCHELL: I don't think that's the appropriate course of action. I don't think it will happen unless there is active American leadership as a broker at the talks. I don't think the Europeans can do it, nor do I think they want to do it alone. And I certainly think the U.N. can't do it. And I don't think -- they know they can't do it alone. It takes American leadership.

I've met with Arafat many times and we've discussed that question. He said to me, look, I want the Europeans involved. I want the U.N., but not to replace the Americans. We regard the Americans as essential, as indeed, the United States role is.

DOBBS: But Arafat is regarded by Sharon, as you know, as an enemy. What do you think of the prime minister's view that he should be exiled?

MITCHELL: Almost every Israeli I've met wishes that someone other than Arafat was leader of the Palestinians. Almost every Palestinian I've met wishes that someone other than Sharon were the leader of the Israelis. But they were elected by their peoples.

And as long as they are in office, chosen by their people, it is they with whom we must deal. That's the position the U.S. government expressed as recently as today by the secretary of state, and I think it's the correct position.

DOBBS: And the president has exempted, if you will, Arafat from classification as a terrorist, because of his representation in those peace talks. We're getting to the level of some considerable niceties, in terms of language of the policy on terrorism, and particularly in terms of the Middle East.

Arafat has denounced terrorism. Sharon, the president of the United States, have asked him to denounce it again. It is clear, I would think it is clear by now, that he cannot control Hezbollah, Hamas and other terrorist groups.

So what is the efficacy of having him further denounce terrorism? Because, apparently the interest of all parties is to end terrorism, period.

MITCHELL: Our committee's report recommended a 100 percent effort by Arafat to control terrorist activities. That language was proposed to us by the Israeli government.

DOBBS: Right.

MITCHELL: They said to us, we know he doesn't have complete control, but we need a complete effort. I think that's the reality. He plainly does not have complete control over all elements in a society. He just as plainly has not made the full effort within the authority that he does have.

Lou, this whole question, who's a terrorist, who do you talk to, who you don't talk to, that's as old as conflict. We went through the same thing in Northern Ireland. The same arguments were used in South Africa.

Remember, Margaret Thatcher said that Nelson Mandela was unfit to enter the United Kingdom because he was a terrorist. How many people in this country today think Mandela is a terrorist? I don't equate Mandela with Arafat. What I'm saying is that issue, how you deal with those who use violence, is as old as conflict and conflict resolution itself.

DOBBS: What I was talking about, though, Senator, is not necessarily in terms of identifying Arafat as a terrorist, because those, as you know, have significant, emotionally-laden values.

MITCHELL: Yes.

DOBBS: What I'm talking about is if Arafat cannot control the terrorism that is being conducted against the state of Israel, what is required to end that terrorism? Because it is not Arafat, and he represents the Palestinians.

MITCHELL: Well, he can't control it all. But he can make a much greater effort than he has, and can significantly reduce it, I believe. And that, to me, is the key.

No society in human history, including our own, has been able, ever to attain the complete absence of violence. And that won't happen in that region. But he has to make the kind of effort that he has not yet made in bringing it down as much as possible. And then I think you could see some progress.

Now, what his fear is -- the only leverage they think they have is this violence. And if they give it up, and then nothing else happens, the violence would be resumed and they'll be criticized. The corresponding Israeli fear is that, look, if we make concessions, next week we'll get six more suicide bombers in Tel Aviv and Jerusalem. You've got to bridge that gap.

You have to have a reduction in violence. And you have to have a follow-on process. That's the real challenge.

DOBBS: And, how to achieve it?

MITCHELL: Well, I think patience, perseverance and stick-to- itiveness. I think what we must do is to expunge the world failure from our vocabulary in making peace. It's tough work, and you get nine steps back before you take a step forward. But you can't get discouraged. And particularly the United States and its leaders, who are indispensable to this process, have to just stick to it.

In Northern Ireland we negotiated for two years. For almost every day until the very last day, people said we'd fail because we didn't have an agreement. So you could say we had 700 days of failure and one day of success. And you've got to look at it the same way in the Middle East. You just got to keep at it. The president will be more involved, the secretary of state, and you've got to stick to it.

And I believe the people themselves there will come to recognize history, geography, and destiny have led them to inhabit the same space. They're going to live side by side, either in violence or in peace. And I think they're going to get sick of the violence and recognize that political compromise is far superior to what they're going through now.

DOBBS: Senator George Mitchell, thanks for being here.

MITCHELL: Thank you, Lou.

DOBBS: Oil prices today surged, rising for the fifth straight session as a result of the violence in the Middle East. And Iraq's call for an oil embargo, lifting prices to a new six-month high, in fact. Iraq even called on its longtime enemy, Iran, for action. The Middle East accounts for 2/3 the world's oil. And prices jumped 83 cents today, to $27.71 a barrel.

Coming up, the major markets drop, worries about the Middle East and technology. Vince Farrell will be my guest on the markets.

An appellate court says no problem, media companies should be able to buy as many television stations in any city as they want. Who says there's a concentration of media ownership?

And judging the SEC and the Department of Justice. Former SEC chairman David Ruder will be here to tell us what he thinks about the way the Department of Justice has handled the Andersen case.

(COMMERCIAL BREAK)

DOBBS: Andersen and KPMG today called off their talks for a global merger of operations outside this country. That deal fell apart because of the growing number of defections by Andersen units to other firms. The latest to split ranks, the operation in Spain. The Andersen partners there deciding to merge with Deloitte & Touche.

KPMG talks failed, just as leaders of Andersen worldwide were meeting in London to choose a replacement for departed CEO, Joseph Berardino. That meeting is expected to continue tomorrow. Berardino resigned last week following the Justice Department's indictment of Andersen and the growing exodus of clients.

As I've noted on this broadcast several times, Andersen was indicted by the Justice Department despite turning itself in for the act of shredding documents in the Enron case. As Steve Young now reports, that indictment could well put a chill on future corporate confessions.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): Some lawyers looking at the implosion of Andersen after it reported shredding documents say Andersen's indictment is sure to chill corporate self- reporting.

STEPHEN AKINN, AKINN, VELTROP: In certain circumstances, I believe that companies will be more reluctant to self-report in the future, because they will be concerned that they will be treated the way Andersen was treated here.

YOUNG: Some white-collar defense lawyers think Andersen may have reported shredding somewhat late in the game, but even they were stunned that a grand jury indicted the company without naming a single individual.

FRANKLIN VELIE, SALANS: Back in the '70s when I was a prosecutor, it was pretty much unheard of to indict corporations. The mantra, if you will, was people commit crimes, not corporations.

YOUNG: The indictment of companies instead of individuals started in the 1980s. Showing how rare it is, a Justice Department spokesman today could only cite one case from the 1990s. Without naming individuals, the DOJ went after a big hospital company formerly named Columbia/HCA. It accused it of committing massive Medicaid fraud.

The hope of cutting a better deal is the reason companies self- report wrongdoing to the government. Sanford Litvack, who used to be a top Disney executive, and before that, assistant attorney general for antitrust, says the Andersen experience provides a warning for corporate lawyers.

SANFORD LITVACK, DEWEY BALLENTINE: Well, you don't report unless and until you know all the facts yourself, No. 1. And No. 2, when you do go, make sure you're in a position to be able to negotiate the outcome.

(END VIDEOTAPE)

YOUNG: The Andersen case goes to trial in May. The corporate crime reporter newsletter says just under half of a small sample of white-collar defense lawyers say the big five accounting firm will be found guilty. That's low, since 90 percent of federal cases in which there are indictments end in convictions.

And of those who predicted a conviction, one of the lawyers said the indictment's unfair. Another called it a terrible exercise of prosecutorial discretion -- Lou.

DOBBS: Steve, thank you very much. Was that one firm that was criminally charged as a firm?

YOUNG: One firm, as far as the Justice Department could tell us today.

DOBBS: Was that one firm an accounting firm, by any chance?

YOUNG: No, it was not.

DOBBS: Steve, thank you very much. Steve Young.

Over the past few months, we've reported here the millions of dollars in soft money contributions given by Enron to political parties and members of Congress, and Andersen, as well -- a lot of money. But if you think Enron and Andersen spent a lot of money lobbying Congress, just wait until you see how much the accounting industry overall spent during the last election cycle. Tim O'Brien has the story from Washington.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice-over): When Arthur Levitt, former chairman of the Securities and Exchange Commission, crusaded to stop accounting firms from providing both auditing and consulting services to the same client, the accounting profession showered campaign contributions on members of Congress. Some of them later threatened to trim Levitt's budget if he persisted.

The big five accounting firms and their trade association contributed nearly $40 million to both Democrats and Republicans over the last 12 years, more than $5 million of that from Andersen alone. The industry has spent millions more on lobbying, more than $12 million in 2000. Critics say the money talks.

BEN BYCEL, COMMON CAUSE: You're not giving that money to get tickets to sit up in the Senate gallery. You're not giving that money to get another pass to the national forest. You're giving that money to buy access and to buy influence, and to persuade legislators that in fact, they should vote your way. And money talks.

O'BRIEN: But to the accounting profession and many others, it's the American way.

JOHN HUNNICUTT, AMERICAN INSTITUTE OF CPA'S: When you're trying to get your point across and you're trying to enlist support in the activity of your members, and, you know, you want to be a player and you want to be a participant in the electoral process, which is a Constitutional right, sure, it gets to be expensive.

O'BRIEN: The accounting profession supported the election of George W. Bush to the tune of almost $650,000. A few months later, Bush nominated industry lawyer Harvey Pitt to head the SEC, succeeding Arthur Levitt and all but ensuring the big five firms would be allowed to continue to both audit and counsel their clients.

(END VIDEOTAPE)

And then there was Enron, reviving the call for reform. There are those who believe that allowing accounting firms the dual role of consulting and auditing, although a huge victory for the profession, may have led to the downfall of Andersen, which had be one of the professions' premiere members -- Lou.

DOBBS: Tim, thank you very much. Tim O'Brien.

The Justice Department's swift action against Andersen, indicting Andersen as a firm, may very well have already killed Andersen. My guest tonight says it should never have come to that. The Securities and Exchange Commission, and not the Department of Justice, should have handled, he says, the Andersen case all along.

And he knows a thing or two about the workings of the SEC. Professor David Ruder was head of the SEC in the late '80s. He joins us tonight from Pensacola, Florida.

Professor, good to have you here.

DAVID RUDER, NORTHWESTERN UNIVERSITY: Good evening, Lou.

DOBBS: First, the issue of indictment. As Steve Young just reported, the Justice Department can cite only one example in the 1990s of indicting a firm. What is your reaction to this indictment of Andersen, as a firm?

RUDER: Well, I think it was both premature and unnecessary. I think they should have consulted with the SEC, which I'm sure they didn't. I'm not speaking for the SEC, and I can't. But it's clear that they did not have the cooperation from the SEC in making that judgment, and didn't particularly care about it. And I think that was wrong.

DOBBS: Why would they not care about it?

RUDER: I have no idea. I agree that there have not been indictments of corporations as corporations, and particularly not of companies in which their integrity and reputations are crucial. This idea of going after Andersen with a blunderbuss, which they knew would cause Andersen tremendous troubles, to me was completely unjustified.

DOBBS: And we should point out, when I say "Professor," I'm saying "professor of law," David Ruder, professor of law at Northwestern University. Professor, the -- if the Justice Department has moved here, does it have the latitude now? Most of the damage is already done. There will be thousands of layoffs.

Andersen, as a firm, is really nothing compared to what it was. Only a shadow could possibly remain, no matter what happens. But could the Justice Department waive or lift this criminal indictment?

RUDER: They could, and I think they should. Andersen came forward in a cooperative way, because the SEC encourages that kind of operation. And what happened was that they came forward, and were challenged by the Justice Department in ways they hadn't expected.

I think now the thing for the Justice Department to do is to lift the indictment, cooperate with Andersen and the SEC to get the kind of arrangement that will allow Andersen to continue in business. Andersen is extremely important, as the fifth of the big five accounting firms. And we need enough accounting firms to have all the big companies audited.

DOBBS: There some considerable irony, Professor, I just wonder what you think of it. I mean, the idea that Microsoft is found guilty of being a monopoly by a Justice Department, charged with the responsibility of avoiding concentration of industry. And at the same time in this instance, it's creating concentration of industry, in the case of the professional services firms. What do you make of that?

RUDER: I think that the Justice Department should not be trying to regulate the accounting industry. That's the SEC's job. They must have had a litigation strategy that probably concentrated on Enron. But I think they could have gotten all of the cooperation from Andersen they could have possibly wanted by coming into an arrangement which would put Andersen on probation, or do something that wouldn't have forced them out of business.

DOBBS: What would you recommend here? You were chairman of the SEC, as the Justice Department and the SEC went after Drexel, Burnham, Lambert and Michael Milken. The Justice Department intricately involved there. Why would there not be that kind of cooperation here?

RUDER: I don't know why. And I'd like to say that your lead-in about Harvey Pitt in your story here was wrong, in my opinion. Harvey Pitt is an aggressive, great person who will be a tremendous leader at the SEC. And I think what should happen is the Justice Department should seek out the SEC, and find some way to regulate with the SEC the accounting profession, and Arthur Andersen. But the Justice Department ought to take a secondary role in this rather than being -- attempting to be the leader. They simply don't know how the securities industry works, and how the accounting industry works.

DOBBS: Are you saying you don't believe that the Department of Justice understood that when it indicted Andersen as a firm, that the immediate effect would be to destroy thousands of jobs, cost Enron shareholders hundreds of millions of dollars in money that could have gone to them had that money been available through Andersen, that they simply did not understand the effect of what that indictment would do?

RUDER: No, I'm not saying that. I think they probably did understand it and were foolish in proceeding anyway. But what they didn't understand is the intricacy of the way this profession is regulated by the SEC. I was particularly stunned when they said they thought it was their job to indict Andersen because they were disappointed about what they'd done in connection with the waste management matter. That's an SEC problem. SEC brought the action, achieved an injunction. And it was the SEC to decide what further penalty it might impose upon Andersen not the Justice Department.

DOBBS: An excellent point. And I -- when you say you disagreed with the report by Tim O'Brien on Harvey Pitt, the chairman of the SEC, let's be specific. What did you disagree about?

RUDER: Well, the comment was that by George W. Bush appointing Harvey Pitt as chairman, they would somehow guarantee that the accounting profession would be treated in a -- in a liberal or soft manner. Harvey's not that kind of person. If he thinks regulation is necessary, he will go forward. And I think that's unfair to make that kind of connection.

DOBBS: I would agree with you if that was the inference from what Tim O'Brien said and we certainly would not, in any way, intend that. Harvey Pitt is an outstanding individual, as knowledgeable a person about the SEC and the accounting industry as anyone.

Let me turn to the issue of what can happen here. What should Harvey Pitt, at the SEC, who must work with the Justice Department day in and day out, who has been remarkably quiet here, what should he do? RUDER: Well, Harvey is in some problem because of his -- of the claims that he should recluse himself from these matters, but I don't think he should. I think that he can go to the Justice Department, and do it with Steve Cutler, his enforcement chief, and say, let's cooperate to create an environment in which we can force Andersen to put them on probation, to do the many, many things that Andersen itself has already suggested it will do, and achieve a compliance environment, which will allow the industry to continue to fulfill its role in auditing the financial statements throughout the United States.

DOBBS: And prosecute aggressively the individuals responsible for criminal acts.

RUDER: Oh, I -- there's no doubt about the fact that those individuals who were involved -- here, I'm not talking about the shredding. I do think that's a Justice Department question. I'm talking about the question of whether there was anyone within Andersen who was engaged in knowingly bad accounting. We don't know that yet, Lou. We don't have that information. All we have is a -- I may say a lot of media speculation.

DOBBS: OK, and one Justice Department indictment. Thank you very much. Former SEC Chairman David Ruder, professor of law at Northwestern University.

Coming up in the broadcast, the markets retreat again across the board. Vince Farrell will be here to tell us what investors should be thinking and perhaps considering doing in these increasingly uncertain times.

A court rules in favor of rolling back ownership rules in many television markets. We'll tell you what it could mean for your town and how many television stations your local giant media company could buy.

Also, some straight talk about global warming from one of, well, an unlikely source, if you will, one of the founders of Ben and Jerry's ice cream. Global warming, ice cream. We'll make the connection. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Stocks tumbled on Wall Street today. Oil prices soaring to a six-month high. The NASDAQ fell to its lowest level in a month. Concerns about oil supply disruptions in the Middle East, diminished earnings expectations and technology weighing on investor sentiment today. The Dow down nearly 49 points. The NASDAQ plunged three percent, losing 58 points. The S&P 500 down nearly 10 points on the day. Christine Romans is here to tell us all about the day's activity on Wall Street.

CHRISTINE ROMANS, CNN FINANCIAL NEWS: Well, Lou, the oil stocks rallied but those big tech stocks fell and the transports were the biggest loser on the day. IBM lost two percent after Goldman Sachs' Laura Ganigliaro (ph) cut her first quarter revenue target on Big Blue. She said any recovery in June would be muted. She also lowered estimates for EMC and Sun Microsystems.

And Goldman's Rick Sherlan (ph) cut Microsoft estimates. He said tech spending is not keeping up with the recovery. Microsoft fell five percent.

Rounding out the tech route, business software maker, PeopleSoft. Profit will below expectations and a third of its market value was lost today.

Bristol-Myers Squibb hit a four-and-a-half year low. Analysts said big stockpiles of its drug and weak demand will hurt earnings.

Schering-Plough fell to the lowest price since 1997.

CNN parent, AOL Time Warner edged higher. It's issuing $4 billion in bonds. And Merrill Lynch turned cautiously optimistic on the advertising market.

Best Buy, meanwhile, issued an earnings warning and Ford said March vehicle sales fell 12 percent.

Oil shares rallied on $28 accrued and a $5 billion merger on the heels of its Pennzoil Quaker State purchase. Royal Dutch Shell announced it'll buy the U.K.'s biggest independent explorer, Enterprise Oil.

The Dow is now down three days in a row, but like yesterday, decliners only slightly ahead of advancers, Lou. A hundred and twenty-two NYSE stocks today, new 52-week highs. Nineteen hitting new lows today.

DOBBS: About 10 to one.

ROMANS: About 10 to one.

(CROSSTALK)

DOBBS: Christine, I'm trying to figure that out. Christine, thanks.

ROMANS: Sure.

DOBBS: Even with today's sell-off, Vince Farrell says these markets remain overvalued. As for the economy, he says we did have a recession and we are recovering. And he's here now to tell us why he says that.

Good to have you here, Vince.

VINCE FARRELL, VICTORY SBSE CAPITAL MANAGEMENT: Thanks, Lou.

DOBBS: You still think we're too overvalued?

FARRELL: Well, we're at the high end of a normal valuation band. Depending on who you talk to, the markets trading at 22 or 23 times earnings this year. Oh, the 5.4 percent 10-year government bond, that's just a little too rich. It doesn't mean there aren't stocks to be bought but the market by itself is a little too overvalued. So bad news like you got today from the analyst estimate cuts are going to have a severe reaction on stocks.

DOBBS: I just realized what I had said to you, too overvalued. That's a little bit like over exaggerating, isn't it? It's a...

FARRELL: But you're the anchor, Lou. You're allowed.

(LAUGHTER)

DOBBS: No, I'm not allowed. I'm just chastising myself and apologizing for using. But with these high evaluations, after what we have seen this decimation in the market, what in the world is going on?

FARRELL: Well, you had stocks that got grotesquely overvalued and then they started down and we thought just because they're down they must be OK. But the fact is you still have to value stocks. The present value of the future steam of earnings under our cash flow and we're not having the earnings or cash flow. And we're going to have a very begrudging recovery because we're -- we have intense global competition, a lot of excess capacities, so earnings are going to be hard to come by.

DOBBS: Hard to come by earnings. We have serious overvaluation. So what should investor do here?

FARRELL: Well, I don't say we have serious overvaluation. I say we have the high end of normal valuation. I think investors, if they have cash, if God all of a sudden came in and said, "Here's a bunch of cash," and it's -- in their minds, they want to have a long-term investment profile in the equity market, a little bit now, a little bit a quarter from now, a little bit six months from now, and you'll catch the average.

But right now, I think we're going to be locked in a trading range that has already been defined for us. Nine sixty-six was the September low, then, we bounced up -- this is on the S&P -- to 1170 whatever. And I think until we get some clarity as to what the earnings are going that will be the band that we trade within. And I think, right now, we're going to get back down towards the mid to lower end of that band.

DOBBS: We're watching this market just slowly, slowly start to recede again, retreat, if you will. There doesn't seem to be anything there to drive this market. Have you identified anything that would reverse course here from the pressure this market seems to be under?

FARRELL: If you wanted to be an optimist and you said the price of oil all of a sudden came down quickly, that might reverse the course. If interest rates stabilized, came down a little bit, that could do it. But I don't think either of those are going to happen.

While I think the price of oil is ahead of itself, I don't think it's going to come down a lot because the Mid East tension is not going to go away.

If there's any recovery at all, it doesn't make sense to me that interest rates are going to go down. I don't know that they're going to go up a lot. So what you have to -- unfortunately, in my opinion, you have to give this a couple of quarters where the recovery takes hold and we are at a recovery, but remember the decline wasn't so steep economically that we have to have this huge rebound. So you're going to have to have a couple of quarters where earnings slowly come at you.

DOBBS: A lot of people not long ago, at the beginning of this year saying jump in now because this is your opportunity, and away we go. Many of those same people now are saying, be cautious. Which do you -- which view do you ascribe to?

FARRELL: I've always been cautious because I...

DOBBS: Right.

FARRELL: ... I've kind of -- my first real impact in the market was in the early 70s when you got decimated. I never forgot that.

DOBBS: Does this seem like familiar territory?

FARRELL: No, not at all. I just think that you have to be very careful and buy stocks selectively. I think you'll make money this year. I think we'll be up but not a lot.

DOBBS: Vince Farrell, always good to have you here.

FARRELL: Thanks, Lou.

DOBBS: Thank you.

Still ahead, a court victory for the big media companies. We'll tell you what it could mean for your television viewing choices in your city. Also, America's most endangered rivers. We'll tell you which ones are most at risk and why and what it means, possibly, for our economy. Stay with us.

(COMMERCIAL BREAK)

DOBBS: A major victory today for the nation's major media companies. An appellate court ordered the FCC to review the rule that limits owners to only two television stations per market, but more stations for the owners could mean fewer choices for you. Peter Viles has the report.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): For the second time this year, a federal appeals court sided with big media and pressured the FCC to relax TV station ownership limits.

GENE KIMMELMAN, CO-DIR, CONSUMERS UNION: We could have one or two companies dominating what news, what information, what culturally relevant material is debated on television in every local community in this country. Now, that's not the way democracy is supposed to work.

VILES: This time the issue was how many stations a single company can own in a city. Current rules allow two TV stations, provided they are not both in the top four in the market, and that there are still eight independent TV owners or voices in the market. The key legal issue, how to count the voices in a market. The FCC counts only broadcast TV stations, reasoning that TV is special, more immediate than newspapers, with public service obligations, and used by more people as a primary source of news. Baloney, said TV station owner, Sinclair Broadcast, which argued if you're going to count voices, you should count them all, the newspapers, the cable systems, the radio stations, and the TV stations.

MARK HYMAN, SINCLAIR BROADCASTING: We don't see the support, it appears, that owning two stations in the same market is anti- competitive or as monopolistic as the FCC has asserted in the past.

VILES: The same appeals court had earlier ruled the FCC's 35 percent cap on national TV household reach is -- quote -- "arbitrary and capricious" and has thrown out the rule barring a cable system from owning a TV station in the same market.

(END VIDEOTAPE)

(on camera): The duopoly rule now goes back to the FCC where new chairman, Michael Powell, has yet to put his stamp of communications policy. But he is widely seen as favoring some sort of relaxation in ownership limits -- Lou.

DOBBS: Well, there's going to be a lot of cheering in media mogul land, but this is a remarkable decision. Those -- what's going to be the effect? How soon could we see a change?

VILES: Well, we have to see how the FCC responds. Do they challenge in court, which is unlikely on this one. How do they rewrite the law? How much they loosen here? And I think the real response is going to have to come from Congress. The courts are weighing in. The FCC is weighing in. If the American people, through the Congress, want something different, they can't expect it to happen through the courts. So perhaps Congress could speak out on this.

DOBBS: As it has wanted to do on occasion.

VILES: Yeah, it hasn't in a while in this issue. It has been six years now. A lot of consolidation in the past six years.

DOBBS: Well, a lot good came with the last way in here, the 1996 Telecommunications Act so that we can have some more interesting time to look forward.

Pete, thanks. Peter Viles.

Well, still ahead here, opposing views inside Israel about what should happen to Yasser Arafat. That's "In Their Words" tonight. Also, the most endangered rivers in this country, the never-ending conflict between nature and commerce, next. (COMMERCIAL BREAK)

DOBBS: Rivers from Alaska to Florida are named on this year's Most Endangered Rivers Report. Environmental group, American Rivers, blames dams and development for the damage. The Missouri River tops this year's list of Endangered Rivers.

The group claims that the Army Corps of Engineers -- quote -- "drained the life out of it" through government operated dams. Army Corps officials countered that charge, saying they work hard to balance competing interests all along that river.

The Big Sunflower in Mississippi follows as number two. And rounding out the top five, the Klamath River in Oregon, the Kansas River and Arkansas's White River.

The new "CROSSFIRE" begins in just a few minutes. Tucker Carlson and Paul Begala join us now from Washington to tell us what we can expect tonight and I suspect some fireworks -- gentlemen.

TUCKER CARLSON, "CROSSFIRE": You can, Lou. The Middle East is ablaze, but it hasn't prevented Democrats from turning this tragedy into a political opportunity, claiming that George W. Bush is somehow behind the car bombings, his inaction has caused the blood bloodshed in the Middle East. You're embarrassed of that view, I bet.

PAUL BEGALA, "CROSSFIRE": Well, in fact, Lou, I'm embarrassed at how incoherent our president's foreign policy has been. I mean it's been very strong in certain -- in Afghanistan, and I applaud that. In the Middle East, on the very same day, on Saturday, he simultaneously opposed Sharon's incursion into the West Bank and endorsed it. Now that's a neat thing. I know he's got a very complex mind...

CARLSON: And if that were true -- if that were true, that would -- that actually would be a problematic stance.

BEGALA: At the United Nations...

CARLSON: You know what, Paul?

UNIDENTIFIED MALE: ... at the United Nations, he instructed our ambassador to support a U.N. resolution, criticizing the incursion while he stood up in Crawford, Texas and he's chopping wood.

DOBBS: Gentlemen, what's it going to take for both of you to get over your embarrassment at your prospective positions on this?

CARLSON: You know I don't know, Lou. I think -- and I'll tell you exactly what it's going to take, it's going to take Pat Buchanan and Ralph Nader, who are joining us for the second part of the show. Two men who know what they believe.

DOBBS: Carl Tucker...

BEGALA: And a man who can wear a bow tie like that in public is not going to be embarrassed about anything. (LAUGHTER)

CARLSON: Thank you.

DOBBS: Paul, I thought there would never be anything I agree with you about. And Tucker, I'm just kidding.

Paul, Tucker, we're looking forward to it. Thank you very much.

Coming up next, your e-mails. Also "In Their Words," comments from some of the people making news today. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Enron, Andersen, and the Justice Department continue to dominate our mail. Amy Harr writes in to say -- "Like the vast majority of Andersen employees, I was in no way involved with Enron. It saddens me that the misdeeds of the few have such a detrimental impact on the jobs and livelihoods of so many."

Ann Carlson, an Andersen employee in Illinois writes in to say, "Lou, I'm sure I'm going to lose my job this week. I never worked on the Enron account. I am flabbergasted that I, along with thousands of other Andersen folks, am going to lost my job due to the actions of the few."

And from Tracy McCallister, "I lost a lot of money through my Enron stock, but I don't blame Andersen for Enron's bad business practices. The Justice Department has let Lay and Skilling not only walk away from this untouched, but let them walk with 100's of millions of the other people's money. The fact that Lou Dobbs has come out and said, 'Wait a minute, where are the Enron indictments?' makes me proud to be a watcher of CNN."

And finally, with oil prices rising again, Gordon Jantzi in Mexico writes in to say, "Americans need to quit complaining about the price of a gallon of gasoline." He says, "They're double here and go up the first of every month." Gordon says, "Wages are about 1/20th of that of the United States." And he says, "I'm sure cars here on average get only half the gas mileage as most aver over 20 years old."

Quite complaining. We love hearing from you. E-mail us at MONEYLINE@CNN.com. Please include your name and address.

Mid East violence, global warming, sleepless nights. We have it all tonight, "In Their Words."

(BEGIN VIDEOTAPE)

BENJAMIN NETANYAHU, FORMER ISRAELI PRIME MINISTER: Well, frankly, I wouldn't have isolated him there. I would have taken him -- put him on the Korean Aid ship, the terror ship that he got from his friends in Iran and put him on the high seas and let him go to his friends in Iran or his friends in Baghdad. I would have not have holed him up and give him an unbelievable, an unbelievable stage. YOSSI BEILIN, ISRAELI LABOUR PARTY: In my view, this is sheer stupidity. This is not the national interest of Israeli, to kill Arafat or to deport him. Arafat is the leader of the Palestinian people and as such, he is the one who signed with us the Oslo Agreements and he is the one who we signed with us or with another Israeli government in agreement, which will be the permanent agreement between Palestinians and Israelis. There is no other Palestinian.

DR. RUSSELL ROSENBERG, NATIONAL SLEEP FOUNDATION: The poll shows that people are more irritable, and more frustrated, in traffic, per se. And, yes, there may be an increase in road rage associated with the decrease in sleep and the increase in sleepiness associated with chronic sleep deprivation, so tempers are flaring on the roads primarily, as a result of not getting enough sleep.

BEN COHEN, CO-FOUNDER, BEN & JERRY'S: The whole world is feeling the effects of global warming. Now, it's time for Washington to feel a different kind of heat, the heat from the true majority of citizens who demand that our government work to reverse global warming now. Take it from a couple of old ice cream guys, if it's melted, it's ruined.

(END VIDEOTAPE)

DOBBS: That's MONEYLINE for this Tuesday evening. Thanks for being with us. I'm Lou Dobbs. Good night from New York. "CROSSFIRE" begins right now.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com





 
 
 
 


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